IRS Penalty and Interest Charges

Individuals

Interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined every three months and is the federal short–term rate plus 3 percent. Interest is compounded daily.

If you file on time but don’t pay all amounts due on time, there is a late payment penalty of one–half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25% maximum penalty is applied. The one–half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals, who file by the return due date, the one-half of one percent rate decreases to one-quarter percent for any month in which an installment agreement is in effect.

If you owe tax and don’t file on time, the total late filing penalty is four and one-half percent of the tax owed for each month, or part of a month, that your return is late up to five months. If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.

You must file your return (or an extension) and pay your tax by the due date to avoid interest and penalty charges.

C-Corp Penalties

If tax is due, there are penalties of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.  If the return is more than 60 days late, more penalties will apply.

S-Corporation and Partnership Penalties

For S-Corporations that file after the extended due date, a $195 per shareholder per month penalty is assessed.  If tax is due, there are additional penalties of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.  If the return is more than 60 days late, more penalties will apply.